CA Final · Advanced Financial Management · Startup Finance
Aarav Foods, a startup, raises Rs 6 crore from a venture capital fund for 20% of its post-money equity. Later, the founders ask what the pre-money valuation was. Which figure is correct?
The pre-money valuation is Rs 24 crore. An investment of Rs 6 crore buying 20% of post-money equity implies a post-money value of Rs 30 crore. Deducting the new investment of Rs 6 crore from this gives the pre-money value of Rs 24 crore.
- ARs 24 croreCorrect
- BRs 30 crore
- CRs 36 crore
- DRs 120 crore
Explanation
Post-money value = 6 / 20% = Rs 30 crore. Pre-money = post-money minus new investment = 30 - 6 = Rs 24 crore. Rs 30 crore is the post-money figure, which is the key distractor, while Rs 36 crore wrongly adds the investment to post-money.
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